In fact, you can probably outcompete new entrants in terms of the sophistication of your product offering, investing in more and more advanced technologies that add incremental value to your customers, helping your grow you top line too.

And this is why you miss the next great wave of innovations that may well sweep away your entire company, no matter how unassailable you look right now.

How do you think Nokia was feeling just 10 years ago. 6 years after this cover story, they were no longer an independent company.

Then of course there’s Kodak, who suffered a similar fate, having been the market leaders for many years. They even invented the first digital camera. But because they focused more on their core market (existing customers), and less on the emerging use-cases amongst non-customers, they didn’t capitalise on their own innovation.

Kodak stock price.

What happens to market leaders when they focus too much on their customers?

This is the crux of the book, and there are lots of things at play here, so for brevity let’s highlight two common scenarios.

Scenario one: Build faster horses

While we don't believe that consumers in general can’t articulate what they want (see the dangers of survivorship bias), there is an element of this when specifically talking to existing customers.

It’s existing customers (rather than consumers in general), who will find it hardest to ‘think outside of the box’ and reimagine how they might interact with a product or service in your category that doesn’t work in a similar way to your existing solution. They will likely anchor everything to their frame of reference.

This makes it harder for you to come up with genuinely disruptive innovations, and focuses you instead of creating new features that increase the value of your existing solutions.

While this sounds great in theory, it can often mean you miss the really big changes (think Kodak and Nokia again here), with devastating consequences. It's the difference between incremental and disruptive innovations.

Scenario two: What market?

Another likely scenario is that you start to pick up on some buzz around a niche market offering for customers that you’d never normally target - often because they can’t afford to pay the premium prices you currenly charge.

This makes them less valuable to you as a business, and because there’s not many of them, you shrug and think ‘what market.’

Unfortunately this gives new competitors a toe-hold in your market, and a loyal customer base. Adoption grows from there, their offering becomes more robust, they spread the word...and before you know it the challenger brand playing in an unappealing niche has grown big enough to eat your lunch.

This is why keeping a regular eye on unprompted brand recall, competitor NPS and purchase drivers is incredibly important, so you’re alerted to this threat before it’s too late.

Startups and challenger brands

The Innovator’s Dilemma focused on how market leaders get disrupted by new competitors coming into their markets, but startups and challenger brands can also be vulnerable when they focus too much on existing users.

Why? Because it can lead to you making the wrong decisions when it comes to future product development.

How? Because if you listen to your existing users - and particularly your most active ones (power users) - they’re going to give you feedback that best serves them. But their usage doesn’t always reflect the average usage of your product or service, and most likely it's focused on adding more powerful features, and more complexity.

This runs directly at odds with what your next wave of news users probably want, which is simplicity and ease of use.

“Your loudest users — the users who complain when you ship something they don’t like, and post in your Facebook Group their feature requests, are a blessing and a curse. Without them, you wouldn’t have a company. But to reach your next 100m users, you need to be willing to ignore them.”

Facebook faced a similar challenge over 10 years ago now, significantly changing the way their newsfeed worked, leading to an angry backlash from existing users. That’s when they had 12 million active users. Today? They have well over 1.2 billion.

The lesson...being focused on your existing users and all the digital metrics they provide is valuable; but to ignore the needs of your next wave of users could be terminal.

The answer

How do you find out what non-customers want? How do you make data-driven decisions when you can’t look at your usual analytics dashboard?

Related posts

Who's going to stand out this year? Will brands that took a battering in 2017 make a statement in 2018? Will it be the year of challenger brands or incumbents?

To bring you answers to these questions (and more), we reached out to 5 experts with very different backgrounds across startups, content, social media, experiential marketing and audio to share their unique perspectives on who are the brands to watch in 2018.

Monzo: The digital mobile-only challenger bank saw nearly half a million new users sign up for its services and claim their bright orange bank cards last year. Monzo is a fantastic way to manage your budget thanks to their instant updates in the app showing you how much you've just spent, and provide added value when used abroad thanks to their free withdrawls up to £200.

Having just received their full UK banking license from the FCA and PRA in 2017, Monzo is rolling out "the best current account in the world". With their slick app and excellent communication, they are playing to millennials by offering a unique customer experience and we're set to see even more new banking features in 2018.

Sanctus: The mental health startup based in London has the vision to create the world's first mental health gym, where people can go and work out their mental health fitness as they would their physical fitness. Right now, the company is working with businesses to create space within a company for people to take time off and talk to a Sanctus coach. In 2018, the company aims to work with 50 business partners and continue to spread awareness of mental health. FounderJames Routledgewrites an excellent weekly newsletter on mental health and growing the startup, which is honestly written and is well worth a read.

Neom Organics:Hot off the heels of significant new investment, this Harrogate-based beauty and wellbeing brand is set to launch a new range of products in 2018, as well as new retail stores both in the UK and abroad. Neom was found by two friends, one of which was an ex Glamour magazine editor who realised her own wellbeing, and that of her close friends, was affected by the stress and demands of modern life. She quit journalism to train as an aromatherapist and nutritionist before founding Neom. The brand's products focus on improving people’s wellbeing through home fragrances and skincare.

My first pick is Pepsi. Lets be honest, Pepsi had an awful 2017 from a brand perspective, they created what they thought was going to be a work of advertising art, an ad that would change the world, but instead it turned them into a global laughing stock.

This is also on a backdrop of huge backlash and increased legislation against sugary drinks. The days when all they had to worry about was competing against Coca-Cola are probably looked on with nostalgia by the marketing team. However Pepsi are a brand with true marketing pedigree, iconic campaigns, partnerships and experiences.

I’m really interested to see how they come back. The test of a great brand is how they react when they are at their lowest. I will be watching Pepsi closely in 2018 to see what they have planned.

My second one to watch for 2018, is the darling of the Aim, BooHoo. The online based fashion retailer has gone through exceptional growth over the last few years, along with some very smart acquisitions.

However they are now at the point where brand building is becoming as important as performance marketing. I expect an innovative business such as BooHoo to evolve its marketing activity to ensure it not only continues its business growth but becomes a brand leader in its own right.

This will be a year to watch brands take the design aspect of their branding in new and exciting directions.